As yields soar, US stocks experience a decline and the S&P 500 establishes a bearish double-top pattern

6 July 2023, Thursday
As yields soar, US stocks experience a decline and the S&P 500

Stock Market Drops as Interest Rates Rise


Interest Rates Soar


US stocks took a hit on Thursday because interest rates in the country went up a lot. The 2-year note and the 10-year bond both reached their highest levels in a long time. This happened because the U.S. economy is doing well.


Good Economic Numbers


The ADP report showed that private employers added a lot of jobs last month, which is a good sign for the job market. The ISM services PMI results were also better than expected. This means that the non-manufacturing sector is doing well too.


Expectations for Higher Interest Rates


Because of the good economic numbers, people think that the Federal Reserve will raise interest rates. This could happen in July and again in September. If this happens, interest rates could reach a level that hasn’t been seen in a long time.


Stock Market Reaction


Because interest rates are going up, the stock market is not doing well. The S&P 500 futures contracts were down by about 1.15% in early afternoon trading. This is the second day in a row that the stock market has gone down. As interest rates rise, stocks become less attractive to investors.


Potential Problems


If interest rates stay high for too long, there could be problems in the banking sector. This is why banks are selling off on Thursday.


Technical Analysis


Looking at the charts, it seems like the S&P 500 is forming a pattern called a double top. This pattern usually happens when the stock market has been going up for a while and then starts to go down. If the stock market breaks below a certain level, it could go down even more.


If the S&P 500 breaks below 4,365, it could go down to 4,275 and then 4,250. This is what the double top pattern suggests.